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Net Promoter Score is not a customer metric October 31, 2007

Posted by Elana Anderson in Customer Analytics, Customer Experience, Database Marketing, Marketing, Marketing Strategy, Marketing Technology.
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Did the title attract your attention? Good! I’ve heard a lot of people talking about Net Promoter (NPS) as the “one metric” – the “killer metric” – that marketing needs to worry about. This concerns me!  I’m not here to bash NPS, there are others who are taking that on. As for me, I think Net Promoter is indeed a useful metric – primarily because it is so simple. And that simplicity is what has the marketing community falling head over heels over it. Well folks, let’s not go too gaga.

Why do I say NPS is not a customer metric? At an aggregate level, according to the research led by Fred Reichheld, a high NPS score correlates to business growth. But, aside from a segmentation of promoters, passives, and detractors, it doesn’t tell you much at an individual customer level. Most importantly, it doesn’t give you any insight into your customers’ needs, desires, and motivations or help you determine what to do or how to treat individual customers. Sure, you might think, “we need to turn the passives into promoters,” but how are you actually going to do that when what motivates one passive is completely different from what motivates another?

There is no killer metric

Sorry to say it, but there is no killer marketing metric. Yep, you need to take a balanced approach. You need value metrics to help evaluate the value and impact of marketing investment. You need operational metrics to help run the operation, diagnose issues, and improve efficiency. The way I’ve heard some executives talking lately, I fear they are focusing their marketing team solely on NPS and turning their businesses upside down to turn every customer into a “promoter.” My response? Pull back the throttle and apply a measure of basic business logic – you don’t want to end up with a lot of happy customers and an unprofitable business. If you review the details of what they have to say, this is certainly not what Reichheld and the folks at Satmetrix intended.

NPS, among others, can be a very useful gauge of the satisfaction and general well being of your customer base. But, it must be combined with other customer metrics (like retention, profitability, etc.) and insight (like life stage, attitudes, etc.) in order to effectively inform customer interactions. The bottom line? Business and marketing executives out there need to recognize that building an effective marketing measurement and customer analysis capability requires resources, focus, new skills (analytic and technical), and a lot of elbow grease.

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Comments»

1. Deborah Eastman - November 6, 2007

Elana,

While I don’t agree with your title, your content is absolutely right on. NPS is a metric of customer loyalty & advocacy. This is important to understanding your customers likelihood to continue to buy and their impact on Word of Mouth (WOM). From that prospective I believe it is a “customer metric”.

However, I agree it’s not the only metric. At Satmetrix we often combine NPS measurement with driver analysis to understand the levers for improving your NPS. We also believe strongly in combining loyalty data with financial data to understand the impact of loyalty on your revenue growth. An example can be found here: http://www.satmetrix.com/solutions/retain_accounts.htm

As the marketing executive here at Satmetrix, our NPS is one of the measures in my overall scorecard, not the only one.

Best,
Deborah Eastman
CMO
Satmetrix

2. Elana Anderson - November 8, 2007

Deborah – Thanks for commenting. Titles can be effective attention grabbers:-) Your input on this issue is important. I’ve just heard way too many people talking about NPS as a “the one” lately.


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